Core views
In 2023, the company was affected by the weakness of the industry, and achieved operating income of 20.073 billion yuan, a year-on-year decrease of 3.90%; net profit to mother was 1,370 billion yuan, a year-on-year decrease of 33.89%. In the first quarter of 2024, the company achieved operating income of 4.495 billion yuan, a year-on-year increase of 19.64%; net profit to mother was 178 million yuan, a year-on-year decrease of 37.18%. Among them, in 2023, the company's household appliances business bucked the trend and achieved revenue of 1,079 billion yuan, an increase of 60.50% over the previous year, which is expected to provide impetus for the company's future development. We believe that with the rebound in the fields of display, education, etc., combined with the company's layout related to AI models and overseas market development, the company's business conditions are expected to recover. According to the company's results for the first quarter of 2023 and 2024, we adjusted the profit forecast for 2024-2025 and added the 2026 forecast. The estimated revenue is 221.58/239.27/25.809 billion yuan respectively, up 9.84%/7.98%/7.87% year-on-year respectively, and net profit to mother is 12.97/14.92/1,626 billion yuan, up -5.36%/15.07%/8.99% year-on-year, respectively, corresponding to PE 18/15/14 times, maintaining the “increase” review grade.
occurrences
The company announced the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved operating income of 20.073 billion yuan, a year-on-year decrease of 3.90%; realized net profit of 1.37 billion yuan, a year-on-year decrease of 33.89%; and realized net profit without deduction of 1,161 billion yuan, a year-on-year decrease of 35.83%. In the first quarter of 2024, the company achieved operating income of 4.495 billion yuan, a year-on-year increase of 19.64%; realized net profit of 178 million yuan, a year-on-year decrease of 37.18%; and realized net profit without deduction of 142 million yuan, a year-on-year decrease of 32.99%.
Brief review
Revenue rebounded year-on-year in 1Q24, and rising raw material costs significantly squeezed profits. In 2023, the company achieved operating income of 20.073 billion yuan, a year-on-year decrease of 3.90%; net profit to mother was 1,370 billion yuan, a year-on-year decrease of 33.89%. In 1Q24, the company achieved operating income of 4.495 billion yuan, a year-on-year increase of 19.64%; realized net profit to mother of 178 million yuan, a year-on-year decrease of 37.18%. Among them, in 2023, business performance was under pressure due to the contraction of domestic and foreign television and education markets; 1Q24's revenue rebounded year on year, and profits still declined significantly. Mainly raw materials such as LCD panels rose, and competition for domestic education tablet products intensified, and prices declined. Affected by this, the company's gross margin in 2023 was 25.67%, down 2.00pct year on year; net margin was 6.94%, down 3.16pct year on year. 1Q24 gross margin was 21.91%, down 7.15pct year on year; net margin was 4.23%, down 3.39% year on year.
Under the weak industry, various sectors are generally under pressure, and the household appliances business bucked the trend and surged. By business, in 2023, the company's LCD main control board and other related businesses achieved revenue of 6.691 billion yuan, a year-on-year decrease of 12.13%; the household appliances business achieved operating revenue of 1,079 billion yuan, a year-on-year increase of 60.50%; the company's education business achieved revenue of 5.538 billion yuan, a year-on-year decrease of 8.81%; the enterprise service business achieved revenue of 1,625 billion yuan, up 2.34% year on year; overseas market revenue for interactive smart tablets and other terminal products was 3.722 billion yuan, a year-on-year decrease of 1.56%; LED LED The show business achieved revenue of 487 million yuan, a year-on-year decrease of 4.60%. Among them, the company's household appliances business is actively expanding domestic and foreign users, and its products and services have been recognized, achieving contrarian growth, which is expected to become a continuous driving force for the company's subsequent growth. In addition, the company is also actively developing the automotive electronics business field and acquires Shenzhen Zhangrui Electronics. The products are mainly used in the basic front-mounted smart cockpit technology platforms of car manufacturers such as Changan, SAIC-GM-Wuling, and Dongfeng.
The education market position is stable, and AI is empowering the digital transformation of education. In 2023, procurement demand in the education market was weak and market competition intensified. According to DiXian Consulting data, the overall sales of domestic education IFPD fell 15%. However, thanks to the company's high-quality products and services, the market share of the Sivo Interactive Smart Tablet has further increased to 50.2%, continuing to rank first in the industry. At the same time, the company actively embraced the wave of artificial intelligence and launched the Sivo teaching model in October 2023, which specializes in educational teaching scenarios. By fully improving response speed with localized computing power, the model enables functions such as automatic courseware generation, preparation and discussion, intelligent classroom feedback, academic analysis, and homework correction, and opens up the entire process before, during, and after class. In addition, the company also incorporated a large model into the Shiva learning machine to achieve functions such as personalized reading plan customization, interactive picture book intensive reading, and AI shared reading. As the AI model is further iterated, the value of AI applications will be further highlighted, and the company is expected to further stabilize its competitive position in the market with the relevant layout and promote an increase in product gross profit.
Investment advice: The company's overall performance declined due to the industry, and the household appliances business bucked the trend. In 2023, the business achieved revenue of 1,079 billion yuan, an increase of 60.50% over the previous year, which is expected to provide impetus for the company's future development. We believe that with the rebound in the fields of display, education, etc., combined with the company's layout related to AI models and overseas market development, the company's business conditions are expected to recover. According to the company's results for the first quarter of 2023 and 2024, we adjusted the 2024-2025 profit forecast and added the 2026 forecast. The estimated revenue is 221.58/239.27/25.809 billion yuan respectively, up 9.84%/7.98%/7.87% year-on-year respectively, and net profit to mother is 12.97/14.92/1,626 billion yuan, up -5.36%/15.07%/8.99% year-on-year respectively, corresponding to PE18/15/14 times, maintaining the “gain” rating.
Risk analysis
(1) Risk that the promotion of new projects falls short of expectations: the company actively promotes the layout of LED, automotive electronics and other fields. If the market development of related industries falls short of expectations in the future, it will greatly affect the achievement of the economic benefits of the company's new projects; (2) Risk of supply chain fluctuations: rising commodity prices and increasing upward pressure on the costs of raw materials such as semiconductors and LCD screens will all adversely affect the company's operations; (3) Foreign exchange hedging business risks: As the company's internationalization process progresses, the import and export business shows large-scale development, but the import and export business is uneven in scale, and the import and export are unbalanced in terms of scale. There is a time difference in time, so there is a risk of foreign exchange exposure.